Four Impact Investing Tools For The 21st Century Of Change

As socially conscious venture are continually multiplying, the ecosystem is overlapping more and more with the financial sector. As a result, several companies and institutions have conducted research on social change and financial return, also known as impact investments.

As part of the movement, InSight at Pacific Community Ventures, CASE at Duke University, and ImpactAssets partnered up for the research project, Impact Investment 2.0, in 2012. Over the years, the creators of the report delved into the investments of 12 funds and the financial and their social returns. In the process, they created case studies encompassing several countries across the globe and a variety of business ventures. RSF Social Finance is a non-profit financial services organization that provides capital to for-profit and non-profit enterprises addressing issues around food, education, and the arts. Another a case study was W. K. Kellogg Foundation’s grants, which support private-sector and for-profit organizations working towards social change in the United States and Africa. The Foundation has a program called Mission Driven Investments that focus on health, education, food, and community development issues. Not only did the impact investment team study the outcomes of each investment, they also found four components of success that were consistent across the board.

Policy symbiosis: funds entered into impact investing deals in partnership with the public sector or with an eye toward policy implications

Catalytic capital: funds used investment dollars to spur additional investment or to boost reputation of investees

Multilingual leadership: fund managers had good financial discipline, but were also experts in the sectors or geographies in which they invested

Mission first and last: funds established a clear strategy to create social impact with investee companies at the outset, but then focused primarily on financial returns over the course of the investment

This is not the only research that has been conducted around impact investments. GIIRS, PULSE, and IRIS are three tools used for impact investing. Several years ago there was a gap between the investments and the impact they were trying to make. These three tools were designed to bridge that gap, and are critical for calculating and visualizing the data on social and environmental impact. GIIRS is an impact ratings tool, PULSE helps with portfolio management, and IRIS serves as a taxonomy. Urbanflow Engine is used for planning new investments in urban infrastructure, and allows individuals of all expert levels to communicate policy formation and visualize the impact of the changes. Before an investment is even made, Urbanflow allows non-profits, private businesses, and city-planning departments to analyze the data and explore alternatives.

Studies and tools similar to the aforementioned resources can provide a better outlook on the results of such investments. They also shed light on the variety of investment opportunities, giving the power to the investor to create social impact through any product they desire. In turn, this freedom of choice can cast an even wider net and impact more individuals in the field of social change.